London firms seal contracts as deepwater oil and gas boom reaches Kenya

Anadarko, Petroleum, BG Group, kenya, oil, gas, tanzania, aim-listed, statoilKenya is latest country to sign-up deepwater oil explorers in oil and gas boom off the east coast of Africa - Image credit to newoceanexploration.com

Kenya is latest country to sign-up deepwater oil explorers in oil and gas boom off the east coast of Africa

The African government has now sealed a number of production sharing contracts with London-listed oil explorers. The whole region - from the Mozambique Channel and up through Tanzania - has become prime real estate for the major international oil firms.


Anadarko Petroleum and BG Group  have already unearthed new discoveries in the area, and ExxonMobil, Statoil and Petrobras are all preparing high-impact drilling campaigns in Tanzania alone this year.


Here we take a look at two AIM-listed juniors who are getting in on the act.  Dominion Petroleum  confirmed that it has now finalised it deal with the Kenyan government for the L9 Deepwater block. It has now signed a production sharing contract which gives it a 60 per cent working interest in the highly prospective area.


The PSC will last for an initial 2 year period, in which it will have to spend US$6.15mn, and it can be extended for a further 2 years if Dominion commits to drilling a well.


Dominion highlighted that the L9 block shares a number of geological similarities to its other key offshore asset, further south in Tanzania where it has identified a 1.1bn barrel prospect. Here it is currently analysing data from a 3D seismic programme over the Block 7.

Farm-out


Dominion is subsequently planning to bring in a new partner though a farm-out deal for both L9 in Kenya and Block 7 in Tanzania.

The junior explorer plans to re-process 2,500km of 2D seismic as well as carrying out other ‘block wide’ geological and geological and geophysical studies. It also plans to acquire around 500 sq km of 3D seismic data during the initial two year exploration period.


While there is understood to be a lot of interest in the East African exploration play, particularly among major oil firms, it seems that Dominion has beaten many to the punch. Landing what it has previously described as one of the last and best new licensing opportunities along the whole of East Africa’s deepwater margin.


"We find ourselves amidst some very large companies in both Tanzania and Kenya, still being able to capture L9 under competitive terms in a competitive process,” chief executive Andrew Cochran said. "The inclusion of L9 in the deepwater portfolio means that 2012 will be a very active year for the company in what is becoming one of the 'hottest' emerging plays in Africa."


Meanwhile another AIM-listed explorer Cove Energy has also secured new prospective acreage in Kenya.


Yesterday a consortium, which also includes larger energy firms BG Group and Premier Oil, signed PSCs for two new blocks offshore Kenya.


Cove has already had a considerable amount of success in the deep waters off the coast of Mozambique. In fact it was one of AIM’s top performers or the past year or so – rising 450 per cent from 20 to just over 110 pence by February 2011 (it has since pulled back to around 80 pence a share).


The junior’s stellar rise was driven by a major deepwater drilling campaign that was led by US oil giant Anadarko Petroleum. In total the partners have found substantial volumes of gas - in the Windjammer, Barquentine, Lagosta and Tubarao discoveries – as well as finding the Ironclad oil occurrence.

Calculations


By Anadarko’s recent calculations the discoveries are collectively worth between US$3-5bn at the moment – which puts Cove’s share at £437-728mn – but the partners are still analysing and testing the assets.


It has an 8.5 per cent stake in the Mozambique assets, but notably it has now taken a larger equity position in this new Kenyan partnership with BG and Premier Oil.


Cove has a 25 per cent stake in the L10A block and a 15 per cent stake in L10B. BG is the operator for both blocks and it holds 40 and 45 per cent respectively. Meanwhile Premier Oil has a 20 per cent stake in L10A and a 25 per cent stake in L10B.


Australian firm Pancontinental Oil & Gas has a 15 per cent stake in both Kenyan assets.


The partners are planning to acquire new seismic data over the two blocks, which cover more than 10,400 square km, in the coming months.

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